Exhibit 9 The Boeing 7E7 Sensitivity Analysis of Project IRRS by Price, Volume, Development, and Production Costs Unit Volume Price Premium Above Expected Minimum Price 10% (First 20 Years) 1,500 1,750 2,000 2,250 0% 5% 15% 10.5% 11.9% 10.9% 11.3% 11.7% 12.3% 12.7% 13.1% 13.0% 13.5% 13.9% 14.4% 14.6% 15.1% 14.1% 15.5% 15.7% 15.2% 16.1% 2,500 16.6% 2,750 3,000 16.1% 16.6% 17.1% 17.6% 17.1% 17.6% 18.1% 18.6% Cost of Goods Sold as a Percentage of Sales 82% Development Costs 78% 80% 84% 21.3% $6,000,000,000 $7,000,000,000 $8,000,000,000 $9,000,000,000 15.9% 18.7% 12.6% 17.0% 19.4% 14.4% 11.3% 17.9% 15.7% 13.2% 10.3% 9.4% 14.5% 16.6% 12.1% 13.5% 11.2% $10,000,000,000 15.5% 8.6% Note: The IRR consistent with "base case" assumptions is 15.7% and is indicated in italics in the table Source: Case writer analysis.
Exhibit 9 The Boeing 7E7 Sensitivity Analysis of Project IRRS by Price, Volume, Development, and Production Costs Unit Volume Price Premium Above Expected Minimum Price 10% (First 20 Years) 1,500 1,750 2,000 2,250 0% 5% 15% 10.5% 11.9% 10.9% 11.3% 11.7% 12.3% 12.7% 13.1% 13.0% 13.5% 13.9% 14.4% 14.6% 15.1% 14.1% 15.5% 15.7% 15.2% 16.1% 2,500 16.6% 2,750 3,000 16.1% 16.6% 17.1% 17.6% 17.1% 17.6% 18.1% 18.6% Cost of Goods Sold as a Percentage of Sales 82% Development Costs 78% 80% 84% 21.3% $6,000,000,000 $7,000,000,000 $8,000,000,000 $9,000,000,000 15.9% 18.7% 12.6% 17.0% 19.4% 14.4% 11.3% 17.9% 15.7% 13.2% 10.3% 9.4% 14.5% 16.6% 12.1% 13.5% 11.2% $10,000,000,000 15.5% 8.6% Note: The IRR consistent with "base case" assumptions is 15.7% and is indicated in italics in the table Source: Case writer analysis.
Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter11: The Basics Of Capital Budgeting
Section: Chapter Questions
Problem 15P: NPV PROFILES: TIMING DIFFERENCES An oil-drilling company must choose between two mutually exclusive...
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Briefly review the sensitivity analysis that is presented in the case exhibits. Under what circumstances is this project financially attractive? What bets were the company making when they went ahead with the project? DO NOT HAVE TO PERFORM YOUR OWN SENSITIVITY ANALYSIS. YOU ARE TO INTERPRET THE SENSITIVITY ANALYSIS THAT IS GIVEN.
Transcribed Image Text:Exhibit 9
The Boeing 7E7
Sensitivity Analysis of Project IRRS by Price, Volume, Development, and Production Costs
Unit Volume
Price Premium Above Expected Minimum Price
10%
(First 20 Years)
1,500
1,750
2,000
2,250
0%
5%
15%
10.5%
11.9%
10.9%
11.3%
11.7%
12.3%
12.7%
13.1%
13.0%
13.5%
13.9%
14.4%
14.6%
15.1%
14.1%
15.5%
15.7%
15.2%
16.1%
2,500
16.6%
2,750
3,000
16.1%
16.6%
17.1%
17.6%
17.1%
17.6%
18.1%
18.6%
Cost of Goods Sold as a Percentage of Sales
82%
Development
Costs
78%
80%
84%
21.3%
$6,000,000,000
$7,000,000,000
$8,000,000,000
$9,000,000,000
15.9%
18.7%
12.6%
17.0%
19.4%
14.4%
11.3%
17.9%
15.7%
13.2%
10.3%
9.4%
14.5%
16.6%
12.1%
13.5%
11.2%
$10,000,000,000
15.5%
8.6%
Note: The IRR consistent with "base case" assumptions is 15.7% and is indicated in italics in the table
Source: Case writer analysis.
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